(Repeats story published late on Monday)
By Martin Dokoupil
PRAGUE, Feb 18 (Reuters) - The Czech crown's recent rise
against the euro is surprising, outgoing Central Bank (CNB) Vice
Governor Ludek Niedermayer said on Monday, adding the monetary
authority would face complicated decisions on interest rates.
The currency's seven-month rally to a record high of 25.075
per euro seen last week <EURCZK=> has been driven mainly by
strong economic fundamentals in the region and a narrowing
negative interest rate spread with the euro zone.
"Firming of our currency against the euro in a recent period
is really surprising to a certain extent and it is hard to
explain," Niedermayer said in an on-line interview at a Web site
www.patria.cz.
"We are not a very attractive investment currency at given
interest rates, and potential for further firming is weakened to
a large extent by firming which has already occurred," he said.
Niedermayer also said it was hard to predict exchange rate
moves, adding the crown was ripe for a correction given its
recent strengthening. But he said some market players might use
signs of a correction to buy the currency again.
The crown showed no reaction to Niedermayer's comments,
trading at 25.250 at 1450 GMT, 11.1 percent firmer from a year
ago and up 4.9 percent this year.
A Reuters poll released earlier on Monday saw the crown
weakening to 25.80 versus the euro <EURCZK=> in one month and at
26.25 in three months [].
Niedermayer also said a risk of a slowing economic growth
was more acute than ever due to fast exchange rate appreciation
and other factors.
The Czech economy expanded by 6.9 percent on the year in the
final quarter of 2007 on a rise in spending, investment and
trade. It lagged behind the exceptional 14.1 percent rise booked
by Slovakia, but beat Hungary with mere 0.8 percent growth.
POLICY DILEMMA
Niedermayer said the most recent monetary policy decision
was complicated, and he expected more policy dilemmas in the
future.
"A decision-making we went through at the beginning of
February was among the hard ones," he said. "Especially because
of views on expected future development of the economy, where
arguments exist for quite different scenarios."
The seven-member CNB board voted 5-2 on Feb. 7 to raise the
key two-week repo rate by 25 basis points to a nearly 6-year
peak of 3.75 percent to tame inflationary pressures. It said the
next move in rates could be in either direction.
Niedermayer, who voted for the rate hike, will not
participate at the CNB's next policy meeting on March 26 as his
second six-year term expires at the end of this month.
"If I was not leaving the bank board, I would tell you that
what the CNB will do during the year is clouded by an unusually
thick fog and the nearest decision making does not have to be
easy," Niedermayer said.
An unexpected inflation jump to a nine-year high of 7.5
percent in January has triggered expectations that the CNB could
delay any interest rate cuts beyond the end of this year.
The data even revived speculation that the CNB may add
another interest rate hike to the 200 basis points worth of
tightening that has already taken place since late 2005.
(Editing by David Christian-Edwards)
